Are You a Candidate for Car Sharing?

The Pros and Cons of Renting Out Your Car

Would you let a perfect stranger drive your car? Would you do it if you could earn an average of $300 per month?

When Edmunds asked this question on Facebook, the answers ranged from "Absolutely not" to more colorful refutations that can't be reprinted here. It's an understandable reaction. Car sharing raises questions about insurance, vehicle security and personal safety, to say nothing of the queasy feeling that comes with letting someone else drive your four-wheeled baby.

And yet, following in the footsteps of people who rent out their homes to vacationers they've never met, hundreds of people are renting out their personal cars through car-sharing services like RelayRides, Getaround and Wheelz. Earning extra money is the primary motivation, but various owners who rent out their cars cite other reasons as well.

How Peer-to-Peer Car Sharing Started
Jeremy Barton of San Francisco felt "a bit guilty" about how little he was driving his Subaru Impreza Outback Sport. "For the most part, I keep it just so I can drive to Tahoe," he says. "I can bike to work, so for five days out of most weeks, my car would just sit idle."

Since Barton joined RelayRides, he has rented out the car 61 times. Now it helps to earn its keep and assuages Barton's parked-car guilt.

The recognition that cars spend a lot of their time doing nothing is what led to the creation of RelayRides in the first place. Co-founder Shelby Clark was bicycling through inclement Massachusetts weather in order to get to the nearest Zipcar. The membership-based service has a national fleet of 9,300 cars that it rents out on a short-term basis.

As sleet blew in his face, he couldn't help but notice the countless cars just parked along the side of the road. If all those people could rent out their cars, he thought, he could save the bike ride to a Zipcar and instead rent a car from one of his nearest neighbors. It's an idea that has received corporate attention. RelayRides has received backing from General Motors and Google. The college-oriented Wheelz received capital from Zipcar.

The Appeal for Renter and Owner
Increased car availability is what makes "peer-to-peer" car sharing potentially more convenient and appealing to renters than the use of corporate-run car-sharing companies like Zipcar and Hertz on Demand. These services may have more locations than typical car-rental outlets, but not enough to be convenient for everyone.

The market for one-to-one car sharing is certainly there. People who don't own cars appreciate the flexibility it offers.

"I went and bought a bed with my roommate and tied it to the top of the car," says Shannon Malloy, who has rented through RelayRides four or five times per month. "It allows me to do things I couldn't do before and can now do on a whim."

Cost is another factor. Obviously, peer-to-peer car sharing is cheaper than owning a car, and the ability to rent cars on an hourly basis gives these businesses a leg up on traditional rental companies. The typical owner-set rates (between $6 and $12 hourly, $40 and $80 daily) are also lower than Zipcar, and unlike that service, there are no sign-up charges, annual membership dues or a minimum rental amount. Services are paid for by the 35 to 45 percent surcharge subtracted from the owner's rental fee.

So far, peer-to-peer car sharing is in its infancy. RelayRides has just a token presence in Washington, D.C., for instance, with only eight rentable cars to date. Contrast that to peer-to-peer hot spots like downtown San Francisco or Cambridge, Massachusetts, which each offer renters a variety of about 40 vehicles within a 2-mile radius.

Once peer-to-peer car sharing reaches critical mass, it's all good for the renters. But what about the owners?

Car sharing can certainly make better use of the underused car population, but money is the primary motivation for owners thinking about renting out their cars. The car-sharing services say the average owner brings in about $300 per month, though Barton earned $650 in March 2012 alone and others make even more. But car owners need to decide if the benefits outweigh the risks associated with lending out their cars to strangers.

The Insurance Issue
Insurance is the issue most people consider first, since an owner's personal insurance policy likely won't cover the damage caused by someone else driving their car. To address this, RelayRides and Wheelz protect a car owner with a $1 million insurance policy that covers liability and any damage to the car during the rental period. Getaround matches respective owners' personal policies up to $1 million. In the event of an accident, renters are responsible for paying a deductible, though RelayRides says it provides a discount if the renter immediately reports an incident.

But these measures don't solve every insurance issue. Insurance companies have declined to renew coverage for owners who use their vehicles as a business without disclosing that fact, and renting out your car would certainly qualify as such an enterprise. In response, California, Oregon and Washington have recently enacted laws to prevent insurance companies from dropping customers who utilize car sharing. RelayRides insists that its approximately 80 users in Massachusetts haven't lost their coverage, but the possibility of cancellation remains, according to several news articles on the issue.

Then there's the case of M.I.T. undergraduate Liz Fong-Jones, who rented out her Honda via RelayRides. The car was involved in an accident in which the renter died. Although the case is still ongoing, there is a good chance the total insurance claims will surpass the $1 million limit of the RelayRides policy. Although Fong-Jones did nothing wrong, there remains legal uncertainty over which among the three insurance companies that represent RelayRides, the driver of the second car and Fong-Jones will pay the claims. This is very much uncharted legal waters, but RelayRides says it believes that Fong-Jones will not be liable.

Yet, all of this hasn't soured Fong-Jones on car sharing. Her new Prius is already available for rent on RelayRides.

Background Checks and Lock Boxes
Another owner concern is that a renter will simply take off with a car. An early car-sharing company that specialized in high-end cars, HiGear, went out of business when cars were stolen by fraudulent renters with stolen identities.

Learning from this mistake, the current crop of car-sharing services uses fraud- and identity-theft technologies along with driving record checks. All the services require a clean driving record, while Getaround and Wheelz also require a Facebook account.

The Facebook account "provides a level of security because renters and car owners can check each other out if they wish," says Getaround co-founder Jessica Scorpio. "It also reduces the chances someone will run off with a car, since the car owner could post on Facebook that the renter is a thief."

Wheelz, which currently operates at four California universities, goes an extra step further by requiring that renters have an e-mail address ending in ".edu" from a participating school.

Car access is another concern. The simplest method, which RelayRides uses for some cars, is for owner and renter to meet for a key swap. That's hardly convenient, though, and for the Wheelz service, it raises serious personal-safety red flags for student renters and their parents.

Getaround uses a similar system and adds an engine immobilizer to prevent the car from being driven without a reservation. RelayRides is developing an app to be used in conjunction with either its own in-car device or with GM vehicles that are equipped with OnStar. Early RelayRides adopters continue to use an older in-car device that's controlled by text messaging.

The Good, the Bad and the User Feedback
All the car-sharing services mentioned also provide a space for renters to leave feedback, as consumers do on eBay and other sites. Owners also have complete control over who they will and will not rent to. Of course, owners don't know what they'll encounter until they've rented to someone for the first time. Owner Jeremy Barton certainly hasn't gone without problems.

"I have been unpleasantly surprised with how irresponsibly some people have behaved with my car, such as leaving it smelling like smoke," he says. During the interview with Edmunds, Barton's Subaru was in the shop for repairs of "significant damage" it suffered during a rental. A borrower hit something — Barton doesn't know what — and didn't report the accident.

Barton says he also needs to put in some extra time, effort and money for vehicle upkeep. Yet he remains committed to car sharing.

"There have been some awesome moments," he says. "For example, one fantastic renter borrowed my car, then washed/vacuumed it before returning it. Then the person sent me a great note thanking me."

There have been other stories among car sharers of renters leaving behind small gifts like a bottle of wine purchased during a trip to a Napa Valley winery.

On the other side of the equation, renter Shannon Malloy notes that owners leave friendly notes about the car or finding parking. Many leave auxiliary audio jack cords in the car so Malloy can use her iPod.

Right for You?
Perhaps if all those polled on Facebook knew the whole story behind car sharing, they wouldn't be so quick to dismiss it. Owners can earn some money, renters can save some and the companies that put them together seem to have done their best to address many of the possible problems and concerns.

As for that queasy feeling that comes with seeing your car driven away by a perfect stranger, well, car sharing certainly won't be for everyone.

† Edmunds.com received the highest numerical score in the proprietary J.D. Power 2014 Third-Party Automotive Website Evaluation Study℠. Results based on responses from 3,381 responses, measuring 14 companies and measures third-party automotive website usefulness among new and used vehicle shoppers. Proprietary study results are based on experiences and perceptions of owners surveyed from January 2014. Your experiences may vary. Visit jdpower.com.